Target-date funds (TDFs) are designed to automatically shift investors’ portfolios to less risky assets as they age but some funds in the United States have higher risk levels than others, according to an analysis by Watson Wyatt.
Using Morningstar Direct research, the company discovered some funds for employees expecting to retire in 2010 still have almost 70% of assets in equities.
Watson Wyatt’s own analysis of TDFs two years ago found some variations between funds as well. For example, allocations to equities for employees 10 years from retirement varied from 40% to 80% among target-date funds. And the equity allocation for employees on their retirement day ranged from 20% to 65%.
“The lack of consistent philosophies in this area means that products with very similar names can have very different compositions,” says Robyn Credico, national director of Watson Wyatt’s defined contribution practice. “If the funds are not appropriately matched with employees’ needs, employers could see many workers delay their retirements.”
For more about TDFs, click here to read Target-Date Funds 101.
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Employees Would Take Lower Salary for Dream Job
The vast majority of Canadians say they would take a lower salary to land their dream job, according to an online survey.
The Monster.ca survey involving 7,982 Canadians finds that 82% of them would take a pay cut if they were offered the job of their dreams while the rest said no.
Interestingly, fewer workers in Quebec are willing to take a pay cut. Seventy-four percent say they would take a reduction in pay with 26% saying no.
“People in the workforce have high expectations today in terms of the roles they play and the money they make but it is interesting to see that most people seem very willing to forego some of the monetary benefits of work in exchange for the more fulfilling role that a ‘dream job’ might offer them,” says Peter Gilfillan, Monster Canada’s vice-president of sales and general manager.
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Investor Confidence Rises
Institutional investors are more confident this month, according to the State Street Investor Confidence Index.
Global investor confidence rose by 8.7 points to a level of 81.0 from April’s revised level of 72.3. North American investors were the key reason for this as their risk appetite increased.
The confidence levels of Asian and European investors changed slightly from the prior month. European investors’ confidence fell by 0.5 points to 76.3 while Asian investors’ confidence rose 0.2 points to 86.4.
“With European confidence remaining essentially flat this month, we note something of a divergence in the timing of the cycle on each side of the Atlantic,” says State Street Associates director Paul O’Connell. “The confidence of European institutions remained buoyant right up through the first quarter, prompting some talk of ‘European decoupling.’ Our latest data suggests that it is not so much that Europe is decoupled, as it is that Europe is delayed relative to the U.S. in experiencing the effects of the current slowdown.”
The index measures investor confidence on a quantitative basis, analyzing actual buying and selling patterns of institutional investors. The more of the portfolio that institutional investors are willing to devote to equities, the greater their confidence.
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Mercer Manager Research Developed to Consider ESG Factors
Mercer’s manager research process will now evaluate the extent to which fund managers proactively integrate environmental, social and governance factors (ESG) into their mainstream investment process.
The move comes as institutional investors are becoming interested in whether managers behave as active owners of capital and whether they consider ESG in their investment decision-making.
“In the past, it was just a small group of organizations that were interested in active ownership and environmental, social and governance analysis,” says Tim Gardener, global chief investment strategist at Mercer. “However, there are a growing number of mainstream investors who believe these issues can have an impact on long-term investment performance.”
Mercer’s existing ESG research process has been expanded to rate all managers on their ESG capabilities at strategy level. From now on, ESG questions will be asked of every manager in the Mercer database and included on every research meeting agenda.
Knowing Green in the July 2007 issue of Benefits Canada has more information about ESG. Click here for more.